The EconomistJune 1st 2019 Middle East & Africa 45L
ong linesof lorries stretch like tenta-
cles from Apapa port, the largest in Ni-
geria. Drivers doze in their cabs, feet flung
over dashboards; some sling hammocks
beneath the chassis. Musa Ibrahim, an
ebullient trader, says he has been queuing
for two days. He gestures at empty build-
ings. “Most of the companies you see here
they done close,” he sighs.
The Nigerian economy is stuck like a
stranded truck. Average incomes have been
falling for four years; the imfthinks they
will not rise for at least another six. The lat-
est figures put unemployment at 23%, after
growing for 15 consecutive quarters. Infla-
tion is 11%. Some 94m people live on less
than $1.90 a day, more than in any other
country, and the number is swelling. By
2030 a quarter of very poor people will be
Nigerian, predicts the World Data Lab,
which counts such things.
Nigeria’s engine was already sputtering
when President Muhammadu Buhari took
the wheel in 2015. The price of oil, which
makes up 9% of gdp and more than 90% of
export earnings, had crashed. But “Baba Go
Slow”, as Nigerians took to calling him,
made a bad situation worse. Instead of let-
ting Nigeria’s currency slide, which would
have stoked inflation, policymakers ra-
tioned dollars to maintain the naira’s long-
standing and artificially high peg to the
dollar. To do so the central bank refused to
release foreign currency for a long list of
imports, ranging from toothpicks to shov-
els. Without dollars for equipment or sup-plies, factories closed and workers were
laid off, leading to a recession in 2016.
The central bank confused things fur-
ther by introducing several exchange rates.
First was the official one of 305 naira per
dollar, an absurdly low rate useful for im-
porting petrol and massaging political
egos. Its second rate, of 320 naira per dollar,
was used to funnel artificially cheap green-
backs to favoured importers. Naturally,
there were not enough dollars to go
around, so most Nigerians (especially
those importing toothpicks) had to pay as
much as 500 naira for one on the black
market. Most of these rates have converged
of late, at about 360 per dollar. But the con-
fusion arising from having so many dis-
courages foreign investment.
The government thinks the answer to
the “dollar shortage” is for Nigerians to
make and grow more and import less (see
next article). To this end it has slapped im-
port taxes on rice and is giving tax breaks
for a huge new oil refinery.
There is little sign of the kind of export-
led industrial revolution that has lifted in-
comes in Asia. This is not only because the
naira is overvalued. It is also because the
state has spent decades neglecting basic
public goods, like roads, schools and elec-
tricity. “In Nigeria if you set up a business
you have to build your infrastructure, you
have to build your power plant, you have to
build everything,” says Abdul Samad Ra-
biu, the chairman of bua Group, a con-
glomerate. Eghosa Omoigui, who managesa tech fund, compares running a business
there to “running a nation state”.
Where urgency is needed, Mr Buhari of-
fers only caution. Few are holding their
breath for any more drive in his second
term, which began on May 29th. “We are
trying to avoid shocks,” explains Adeyemi
Dipeolu, his economic adviser. Sharp cur-
rency movements or hikes in electricity ta-
riffs would be felt by ordinary Nigerians.
Yet officials are postponing a crisis, not
averting one. Consider borrowing. The
debt-to-gdpratio is 28%. But Nigeria col-
lects so little in tax that interest payments
swallow about 60% of federal revenues.
“We don’t have a debt problem, we have
a revenue problem,” insists Udoma Udo
Udoma, the budget minister in Mr Buhari’s
first term. The government plans to raise
funds by selling off some of its share in
joint-venture contracts with oil companies
and might hike taxes on luxury goods. Rev-
enues are rising, but fall far short of budget
targets. Some of the gap is probably being
filled by running up an overdraft with the
central bank, which now holds more assets
than all other banks in Nigeria combined.
Public finances would be healthier if
the government raised the price of fuel,
which is imported by the state oil company
and sold on at a loss. Last year this subsidy
was worth at least 0.5% of gdp—as much as
the government spent on health care. Poli-
ticians are scared to end it. An attempt to
do so in 2012 led to massive protests. Al-
though the government has expanded
school-feeding programmes and is work-
ing on a safety-net for the poor, most citi-
zens get few benefits from the state. Ox-
fam, a charity, ranks 157 countries on their
commitment to reducing inequality, based
on social spending, taxes and labour laws:
Nigeria comes last.
For Nigeria to prosper, the state could
harness the vim of its 200m citizens. In-
stead it ignores them, except when politi-
cians need votes. People have come to ex-
pect nothing from government, says Chika
Okeke, who owns a small stationery shop
in Lagos: “you struggle yourself.”^7LAGOS
Nigerians got poorer in Muhammadu Buhari’s first term. A revenue crisis looms
in his secondNigeria’s economy (1)More misery ahead
Over a barrelSources:IMF;DatastreamfromRefinitivNigeria, GDP, % change
on a year earlierBrentcrudeoilprice
$ perbarrel-20246810122009 15 19 2009 15 190255075100125